5 Ways to Make Yourself a Better Retirement Saver

When it comes to saving for retirement, do you find that the spirit is willing, but the flesh is weak? You’re not alone. When America Saves asked 1,000 people to quantify their “interest in saving” for the latest release of its Personal Savings Index, the average score was 65 out of 100. But when the same people were asked to assess their actual “savings effort,” the average grade dropped to 57. So how can you bridge this disconnect and ensure that your inclination to save will translate to actual money making its way into your retirement accounts? Here are five suggestions.

1. Adapt your lifestyle to your savings regimen instead of the other way around. Most people pay their living expenses each month and, if there’s any money left over, consider putting it into savings. Problem is, too often there’s nothing left over. Our wants and needs tend to expand to eat up our entire paycheck.

Which is why the opposite approach makes more sense: Set a savings target—10% is a good start, but 15%, the figure cited in this Boston College Center For Retirement Research study, is even better—and then base your standard of living on your income minus your savings. So if you’re making, say, $50,000, resolving to save 10% or $5,000 upfront will force yourself to live as if you’re making $45,000. This turns the conventional savings paradigm on its head. Instead of saving what’s left of your paycheck after spending, you spend what’s left of your paycheck after saving.

2. Put saving on automatic. Unfortunately, the resolution to save 10% or 20% often crumbles in the face of temptation, whether it’s the desire to have the latest electronic gadget, eat out instead of cooking in, or own an amenities-packed Statusmobile when a modest but reliable auto will do. But there’s a simple method to prevent your brain’s hard-wired urge to spend from getting the upper hand over your desire to save: arrange to have a portion of each paycheck diverted to savings before you get your hot hands on it.

The easiest way to put your savings on autopilot is to participate in a 401(k) or other workplace savings plan that automatically deducts 10%, 20% or whatever percentage of your earnings you stipulate from your paycheck and moves it into your retirement account. (Such plans often have another benefit: the employer often matches your contribution, thus leveraging your savings effort.) If you don’t have access to such a plan, consider signing up for an automatic investing plan that transfers money each month from your checking account to a mutual-fund account.

3. Make it harder to spend. Of course, even after setting up systems to save first and put savings on autopilot, we humans can still be very resourceful at finding ways to fritter away our dough. So you may need to take, shall we say, more drastic measures to cut down on unnecessary outlays. One effective way to rein in superfluous spending is to avoid carrying credit and debit cards and operate on a hard-cash basis. This helps not only by limiting purchases to the amount of cash you actually have on hand, but research shows you’re also just likely to spend less when using cash than a credit card because you don’t have the same feeling of parting with money when paying with plastic. (And you’ll also avoid those double-digit interest charges on credit-card balances.)

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There are other techniques that can put a speed bump between you and impulse spending. For example, you might set a “cooling off” period of, say, a week before making any nonessential purchase of, say, $100 or more to give yourself time to reconsider whether you really need that new outfit. You could promise yourself that before making any sizable purchase you’ll first have to justify it to a spouse or friend. You might also just make it a point to avoid what the nuns back in my Catholic grade school called the “near occasions of sin”—or, in this case, activities that tend to result in spending money, whether it’s browsing in clothing boutiques or electronics stores or surfing the web for discounts and sales.

4. Try a carrot. Rather than stifling your natural desire to spend, you might also try harnessing it in a way that helps you to save. For example, you could set an ambitious savings goal, say, tucking away $5,000 or $10,000 over the course of a year and then promise yourself a specific reward if you achieve it, maybe a new smartphone or laptop or a weekend trip. Or you could set smaller, shorter-term goals (such as increasing your 401(k) contribution rate by a percentage point or two) and give yourself smaller rewards for achieving them (dinner at a nice restaurant, tickets to a show or sporting event). Call it a bribe if you wish, but the idea is to create an incentive that will leave you with more money in savings than you would have had otherwise.

5. Use a stick. Sometimes the fear of failure or being penalized can be as powerful an incentive to get you to do the right thing as the prospect of a reward. And that’s one of the premises behind StickK, a site that employs the concept of a “commitment contract,” or a binding agreement you make with yourself, to help achieve something that’s important to you.

The process is simple: You identify a goal—say, saving 10% of salary over the next three months—and agree that if you don’t reach it, you’ll pay a penalty ($100, $500, whatever) to a friend or a charity. Or if you really want to up the incentive not to fall short, you can stipulate that the penalty be paid to a foe or a cause you oppose. So, the money might go to a Republican political action committee if you’re a Democrat or to a Democratic PAC if you’re a GOP supporter.

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You can create a similar arrangement on your own without the financial penalty by simply informing your friends and family of your goal. Their encouragement and support should increase your chances of success. But going public creates another incentive: to avoid the disappointing feeling of knowing you let your supporters down, you’ll likely do everything you can to stick to your commitment and reach that goal.